The SEC and Gary A. Ray, the former vice president of human resources at KB Home, Inc., a Los Angeles-based homebuilder, settled options backdating charges. The SEC's complaint alleges that Ray used hindsight to pick advantageous grant dates for KB Home's annual stock option grants in order to enrich himself and others at KB Home. On many occasions, the grant dates coincided with dates of low monthly closing prices for the company's common stock. The SEC's complaint further alleges that Ray continued to use hindsight for stock option grant dates even after the Sarbanes-Oxley Act of 2002 imposed stricter reporting requirements. The complaint alleges that, because of the backdating scheme, KB Home filed proxy statements with the SEC that inaccurately stated that KB Home granted options at market value on the date of the grant. In addition, the complaint alleges that, by concealing his knowledge about stock option backdating at KB Home, Ray contributed to KB Home's filing of a false and misleading quarterly report with the SEC in 2006. Ray received backdated annual stock option awards amounting to 380,000 shares of KB Home stock and profited more than $480,000 from exercising many of these options.

Ray agreed to settle the Commission's charges without admitting or denying the allegations in the complaint. Under the settlement, Ray consented to the entry of an order that (i) permanently enjoins him from future violations of Sections 10(b), 13(b)(5), and 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, and 16a-3 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-13, and 14a-9 thereunder; (ii) requires him to pay $540,651.58 in disgorgement and interest and a civil penalty of $50,000; and (iii) bars him from serving as an officer or director of a public company for five years. The settlement is subject to approval by the court.